Introduction
Nowadays we cannot help but see and hear many troubling things are going on around us. The news overflows with incidents of corruption scandals—of poverty and hunger. The real median income of America has increased only 15% in the last 30 years (Bakan, 2006). That is a .5 % growth each year versus the 1.9 % real GDP growth per year (“A History of Standard Living”, n.d.). How can that be? Where is the American dream? These and other symptoms are a result of the rise and power of corporations. Corporations cause great harm to the society by being amoral, by creating scarcity, and by hijacking democracy.
The aim of the current paper is to evaluate harm that is caused by the corporations. This evaluation could help stop corporative outrageous breach of all limits or at least make people to ponder over this problem.
The Contemporary State of Corporate Crimes
The corporations practice fraud and unfair attitude to the stakeholders using their interests as a shield for deriving additional benefits. Lately, the newspapers and Internet are describing multiple scandals related business ethics. “Corporate crime inflicts far more damage on a society than all street crime combined” (“Twenty Things You Should Know”, 2007). According to the FBI (n.d.) data, health care fraud alone is estimated at 100 billion – 400 billion a year. That is 30x – 100x more than the combined cost of all street crime in the U.S.A.
Top 100 of corporate crimes in 1990’s were committed in the following categories of misconduct: “environmental (38), antitrust (20), fraud (13), campaign finance (7), food and drug (6), financial crimes (4), false statements (3), illegal exports (3), illegal boycott (1), worker death (1), bribery (1), obstruction of justice (1) public corruption (1), and tax evasion (1)” (Mokhiber, 1996).
Some of the corporations have become known all over the world for their financial fraud (Enron), health and life threat (Johnson&Johnson), environmental issues (Monsanto) or creating natural resources scarcity (Coca-Cola).
Sometimes contemporary corporate crimes has become “gentler” and acquired the features of hidden fees. Thus, the corporate crimes switched to the sphere of banking, credit card services, cable, cell phones (Mokhiber, 2008).
Usually, the corporations are extremely inventive when it comes to the corporate profits and total control in the market.
Analysis of the Case of the Dodge Brother vs. Henry Ford
The lawsuit of the Dodge brothers against Henry Ford which took place in 1916 was one of the classical examples of ethical corporate misconduct which was also supported by the Michigan Supreme Court decision. The Dodge brothers accused Ford in misuse of his supreme authority in the corporation restricting dividends payouts. Ford defended his position telling that he was going to spend the investments on further development of the company taking into account stakeholders’ interests. As a matter of fact, every corporative ethics code formally takes into the consideration the interests of all the stakeholders of the company, not merely shareholders. In practice, the interests of stakeholders were roughly violated (Stout, 2008).
A Michigan Supreme Court Judge had issued an order as follows: “a business corporation is organized primarily for the profit of the stockholders, as opposed to the community or its employees” (Stout, 2008).
Fortunately, the precedent of this case is only used by the laypersons. Otherwise the corporations would have the possibility to completely disregard all ethical issues. It is important to understand that ethics is the primary concern of every case. Morality and justice are to be the main priorities in a contemporary human society.
Corporate Accountability and Excessive Power
Unfortunately the corporations were given an excessive power without any accountability and control from the governments’ side. Multinational giants derive excessive profits thus being able to lobby their interests in the government and courts. It seems that there is no one who stayed apart from the scandals occurred to Enron, Monsanto, Coca-Cola, Wal-Mart, Chevron and many other corporations which finally had lost their good reputation in the market or even stopped their activity.
Besides, it is difficult to charge the corporations because they are not individuals thus they cannot be incarcerated. Hence, they do not have the fear of the retribution of justice that real people do. The law obliges corporations only to act in the interest of the shareholders leaving them a loophole for ethical misconduct (Stout, 2008). This is a reason why some of the corporations are inherently immoral. They are more than willing to manipulate financial and political institutions and processes to the detriment of our livelihood, ethics, and wellbeing.
Unfortunately, corporations managing style is characterized by irresponsibility, lack of empathy, grandiosity, asocial tendencies, and absence of remorse (Bakan, 2006).
Bakan (2006) compares “corporative regime” to Nazi regime: “it should not be forgotten that many U.S. corporations today regularly do business with totalitarian and authoritarian regimes—again, because it is profitable to do so” (p. 89).
Compliance with Law: How Much?
Obviously a capitalistic system endures ethical and moral crisis. “We have over the last three hundred years constructed a remarkably efficient wealth-creating machine, but it is now out of control” (Bakan, 2006, p. 159). It is time to think about the impact of ill “psychopathic” corporate culture on the society (F, 2006).
It is essential to maintain a regulation system which would be able to serve state and public interests. It is not clear whose interests the state regulation system is serving now. The main goal of the state regulation is to admonish corporations against doing harm to the society and exploitation of individuals.
Unfortunately, “Compliance with the law, like everything else, is a matter of cost and benefit (Bakan, 2006). A need for money-grabbing is inherent in human nature but it must not take the leading position when it comes to human lives, dignity, equality, fairness, and democracy principles. Morality and ethical values must prevail over greed. Ethical behavior must be promoted in the society by all means, namely: media propaganda, appropriate laws, strict punishments in case of violation, and control of law performance.
Bakan (2006) stated that the regulations are designed to pay for costs they exploit or externalize onto society and the environment. For this purpose the regulations must be effective and appropriately enforced. Only in this case they could prevent harm cause by corporations by exploiting people, environment, and communities.
Scarcity of Resources, Poor Product Quality and Contamination
Large corporations create monopolies and artificial scarcity of resources to drive prices upward. Corporations are designed to create wealth and they perform this role effectively without regard to any ethical, moral or legal rules. The corporations aim at deriving extra profits by exploiting “most of the world’s natural resources and almost all areas of human endeavor” (Bakan, 2006, p.111).
In addition, the corporations use various tricks to encourage consumers to buy the products they do not need. One of such predatory methods is to make an impact on parents with the help of their children (Bakan, 2006).
Coca-Cola Ethical Issues
In accordance with information provided by India Resource Center (2005) Coca-Cola has created severe water shortages in the communities near its water bottling plants in India.
In addition, Coca-Cola was accused in providing customers with the products of poor quality. The Centre for Science and Environment tested drinks produced by the company and found significant levels of pesticides in its beverages (O.C. Ferrel, Fraedrich and L. Ferrel, 2011).
In 2008, Coca-Cola attempted to convince target group in Australia that diet Cola was healthy for children partially concealing the information regarding quantity of caffeine and sugar in a beverage. This attempt caused negative feedback from the Obesity Policy Coalition and the Australian Dental Association and Parents’ Jury (O.C. Ferrel, Fraedrich and L. Ferrel, 2011).
Ovation Pharmaceutical Ethics Scandal
Financial fraud and employees tyranny seems to be insignificant issues when it comes to human lives. The details of the lawsuit initiated by FTC against Ovation Pharmaceuticals strike the reader with cold-blooded and selfish cynicism.
In accordance with Washington Post (2008), the FTC filed a suit after Ovation Pharmaceuticals bought the rights to the only other drug approved to treat babies with a congenital heart defect and then raising prices over a 1300 percent.
The FTC claimed that Ovation Pharmaceuticals raised the price of Indocin, a medicine for the treatment of newborn infants, from $36 to $500 per vial. Ovation Pharmaceuticals has acquired the rights for Indocin in 2005 and for NeoProfen in 2006 which were two only medicines earmarked for the treatment of the little patients with a congenital heart disorder available in the U.S. On creating a monopoly, Ovation Pharmaceuticals had significantly increased its profits violating antimonopoly law. But the most horrific crime was that the corporate greed took lives of new born babies whose parents were not able to purchase the necessary medicines (Cohen, 2008).
Monsanto Innovative Technology and Ethical Issue
Monsanto, the world’s largest producer of genetically modified seeds, acquired the patents “Genetic Use Restriction Technology” - a technology that would create sterile seeds and require farmers to repurchase seeds every year. Repurchasing GM seeds every year put undue financial burden on the farmers. The law advocates the Monsanto’s right to control its creations. Monsanto even initiated an investigation when suspected violations from the farmers’ side (O.C. Ferrel, Fraedrich and L. Ferrel, 2011).
Obviously, Monsanto is a champion in generating ethical issues. Moral and safety implications of genetically modified (GM) food are the point of concern for many stakeholders of the company.
Some of the scientists argue that ingesting herbicides in seeds bring toxic effect on final consumers of the products. Factually, glyphosate exposure occupies the third place among the most commonly reported illnesses of California agricultural workers which could be attributed to the effect of GM seeds consumption. Another human and animals’ health concern is the utilization of Posilac bovine hormone designed to increase milk yields. Besides, some of the researches claim that GM seeds utilization threatens with biodiversity vanish (O.C. Ferrel, Fraedrich and L. Ferrel, 2011).
This is not a comprehensive list of crimes committed by corporations. Enron is worth to be mentioned in this context as well. To drive the prices of electricity in order to extremely increase its profits, Enron manufactured an artificial energy shortage in California in 2000 while lobbying for deregulation (Bakan, 2006, p.101).
An analysis of the represented cases indicated that the public is more likely to force corporations to make changes in their predatory policies. Usually, the feedback from the governments is much calmer.
The Way Corporations Manage Deregulations
Corporations take power from the people through immense political contributions and bribery. Even corporations that join Fortune 500 despite of their well-composed thick ethical codes do not disdain this unlawful activity.
A Virginia U.S. Supreme Court Judge has ruled that the US band for direct campaign contributions for corporations is unconstitutional (Barnes, 2011).
It looks like a standard scheme of making super profits: to obtain a monopolistic influence in the industry, rise prices for the products and then lobby corporate interests to ensure financial stability for years. As a matter of fact, multinational conglomerates with more than a trillion of assets are dominating the market and influencing political decisions. For example, 10 banks in the USA control approximately 35 percent of the assets in the banking system. More than 53 percent of banking assets belong to the 25 biggest banks in the USA. The experts predict further consolidation and merger. There is a strong tendency that big monopolist banks will be controlling a significant share of all assets (Jake, n.d.).
Citicorp-Travelers, Bank of America, Merrill Lynch, and Prudential and others have enough reasons to pursue their mercantile goals suborning Congress officials. The big goal is not only to get extra benefits, but to obtain control of key sectors of national economy skipping the interests of minor taxpayers and the industry (Jake, n.d.).
The amount of $100 million which was earmarked for support of congressional races in 1998 could be a good investment for any national industry.
Sarbanes-Oxley Act enacted in 2002 after several celebrated cases with Enron, Adelphia, Peregrine Systems, WorldCom and Tyco, improved the situation a little bit because the scandals had shook public confidence in American securities markets questioning further successful development of the U.S. economy (Jake, n.d.).
Ethics Issues in the United States and in Other Countries
Even though the need for change is evident, our current judicial system makes it difficult to curtail the power of corporations. Over 120 companies were under investigations by the Justice Department for violating the Foreign Corrupt Practices Act in 2009 (Searcey, 2009).
The Justice Department charged Lucent Technologies, which operated in the telecommunication market and fined it for $2.5 million because of the company’s failure to do proper records of its employees’ sightseeing tours which were presented as factory tours.
Monsanto was noticed to commit bribery in Indonesia and other countries where it operated between 1997 and 2002. The actions resulted in a significant fine of $500,000 paid to the Security and Exchange Commission and $1,000,000 paid to the Department of Justice (O.C. Ferrel, Fraedrich and L. Ferrel, 2011).
Enron was accused in lobbying its interests and financing presidential election campaign. The deregulation was conducted with the help of company’s then-chairmen Kenneth Lay (Neuman, 2002).
The same practice is popular all over the world and it sometimes even appreciated. For example, some Asian, African, European and Russian business associates accept expensive gifts and cash (Searcey, 2009).
Well-known German Siemens AG paid $800 million in fines to conduct bribery investigations including alleged payments to officials in the government all over the world to win contracts. Unfortunately, the corruption at Siemens reached the top management. Siemens was accused in spending more than $1 billion on bribes to win contracts all over the world (Searcey, 2009).
Energy companies Kellogg Brown & Root LLC agreed to pay $579 million for charges involving bribes of Nigerian officials (Searcey, 2009).
The list of such companies is endless and economic history represents a lot of high-profile bribery cases. The corporations pay fines that are sometimes foreseen in the companies’ budgets. It is a rare case when the companies’ officials refuse to take a bribe if it was offered.
The Scope of Lobbying
In accordance with the Center Analysis of 2010 lobbying reports data, $3.47 billion was invested in lobbying by corporations, trade associations, universities and other organizations (Beckel, 2011). It is less than $3.49 billion spent on lobbying in 2009. While such industries as energy, financial, defense enhanced lobbying efforts, health industries and business associations scaled back the last year. For example, Pfizer expended over $13.33 million dollars for federal lobbying in 2010 (Public Policy, n.d.).
Lobbying takes place mainly in climate change and economic legislation, health insurance, financial regulatory and student loan reforms. Despite of lobbying intensity abated, it did not disappear at all (Beckel, 2011).
At the same time, the analysis of the Center indicated that 65 percent of the biggest spending companies increased their lobbying expenditures in the recent years (2009-2010). The following companies are in this list: FedEx (56.3%), ConocoPhillips (8.6%), Boeing (6.2%), General Electric (48.8%), and AT&T (4.5). PG&E’s became a leader showing 624 percent increase (Beckel, 2011).
However, some of the companies experienced a reduction in lobbying expenditures in 2009-2010. Among them such companies and organizations as U.S. Chamber of Commerce, Blue Cross, National Association of Realtors, Verizon Communications, Pharmaceutical Research and Manufacturers, Pfizer and Southern Co.
Thus, using simple calculations (4,604 bills were introduced in 2010) $3.47 billion can be translated into $753,885 per piece of legislation.
"At the dawn of this new decade, the public needs to know about the forces who may be trying to stack the deck in their favor" (Beckel, 2011).
Conclusion
Corporate ethics endures a serious crisis caused by unlimited power and absence of accountability. On the contrary to individuals, corporations cannot be incarcerated. Capitalism has become selfish and immoral because of corporations evils. Unlimited power gives corporations the right to do the arbitrary rule not taking the interest of the public into account. They are required by the law only to act in the interest of the shareholders. They are fwilling to manipulate national financial and political institutions as well as the processes to the detriment of our livelihood, ethics, and wellbeing. Corporations are a threat to our way of life because they are amoral, take more than their fair share, and have too much influence in our governments.
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